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Why Does Technology Advance in Cycles?

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  • Olsson, Ola

    () (Department of Economics, School of Economics and Commercial Law, Göteborg University)

Abstract

Long-run technological progress is cyclical because drastic innovations that introduce new technological opportunity are only profitable at times when repeated incremental innovation has nearly exhausted existing technological opportunity and driven entrepreneurial profit and income growth towards zero. The article presents a ’technological opportunity model’ where endogenous drastic and incremental innovations interact with exogenous discoveries in an idealized metric technology space. New ideas are created by convex combinations of existing ideas. Diminishing technological opportunity results in lower profits and growth, which then makes costly and risky drastic innovations profitable again. This relationship between intense drastic innovation intensity and poor levels of economic growth receives some empirical support.

Suggested Citation

  • Olsson, Ola, 2001. "Why Does Technology Advance in Cycles?," Working Papers in Economics 38, University of Gothenburg, Department of Economics.
  • Handle: RePEc:hhs:gunwpe:0038
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    File URL: http://swopec.hhs.se/gunwpe/papers/gunwpe0038.pdf
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    References listed on IDEAS

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    Cited by:

    1. Vaal, Albert de & Yetkiner, I. Hakan & Zon, Adriaan van, 2002. "The cyclical advancement of drastic technologies," CCSO Working Papers 200217, University of Groningen, CCSO Centre for Economic Research.
    2. Zon, Adriaan van & Kronenberg, Tobias, 2005. "General Purpose Technologies and Energy Policy," Research Memorandum 011, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    3. Lundström, Susanna, 2003. "Technological Opportunities and Growth in the Natural Resource Sector," Working Papers in Economics 116, University of Gothenburg, Department of Economics.
    4. Zon, Adriaan van & Fortune, Emmanuelle & Kronenberg, Tobias, 2003. "How to Sow and Reap as You Go: a Simple Model of Cyclical Endogenous Growth," Research Memorandum 029, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).

    More about this item

    Keywords

    technology; growth; long waves; cycles; techno-logical paradigms; innovations;

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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